Snow Co. began operations on January 2, 2017. It employs 15 people who work 8-hour days. Each employee earns 10 paid vacation days annually. Vacation days may be taken after January 10 of the year following the year in which they are earned. The average hourly wage rate was $24.00 in 2017 and $25.50 in 2018. The average vacation days used by each employee in 2018 was 9. Snow Co. accrues the cost of compensated absences at rates of pay in effect when earned. Prepare journal entries to record the transactions related to paid vacation days during 2017 and 2018.

Given that,

Number of employees who work for 8-hours a day = 15

Annual paid leaves for each employee = 10

Average hourly wage rate (2017) = $24.00

Average hourly wage rate (2018) = $25.50

Average vacation days used by each employee in 2018 = 9

Therefore, the Journal entries are as follows:

(1) On 2017,

Wages expense A/c Dr. $28,800

To vacation wages payable $28,800

(15 * 8 hrs * 10 days * 24)

(vacation wages)

(2) On 2018,

Wages expense A/c Dr. $1,620

Vacation wages payable (15 * 8 hrs * 9 days * 24) Dr. $25,920

To cash (15 * 8 hrs * 9 days * 25.50) $27,540

(cash paid for vacation wages)

(3) On 2018,

Wages expense A/c Dr. $30,600

To vacation wages payable $30,600

(15 * 8 hrs * 10 days * 25.50)

(vacation wages due in 2018)